The Genuine Dispute Doctrine – 3
In this connection, the California Supreme Court found potentially misleading the statements in some decisions to the effect that under the genuine dispute rule bad faith cannot be established where the insurer’s withholding of benefits “is reasonable or is based on a legitimate dispute as to the insurer’s liability.” (Century Surety Co. v. Polisso (2006) 139 Cal.App.4th 922, 949, italics added; see also Chateau Chamberay Homeowners Assn. v. Associated Internat. Ins. Co., supra, 90 Cal. App.4th at p. 346 [“‘if reasonable or if based on a legitimate dispute’ “]; Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1281 [same].) In the insurance bad faith context, a dispute is not “legitimate” unless it is founded on a basis that is reasonable under all the circumstances.
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